On average, the economy looks OK. But averages are misleading. Several large groups of people are struggling. They all have one thing in common.
Who’s Unhappy?
Those looking to buy a home but cannot afford the record high prices, are not faring well in this economy.
The last great time to buy a home was in 2012. Over the next eight years, home prices moved further and further away from wages.
When the Covid pandemic hit in 2020, we had record QE, record fiscal stimulus, mortgage rates hit record lows, and inflation hit the highest levels in 40 years.
In response, home prices soared out of sight. Worse yet, the price of rent rose at least 0.4 percent for 28 straight months.
Rent of Primary Residence vs OER
Rent vs OER Chart Notes
- OER stands for Owners’ Equivalent Rent. It is the price one would pay to rent their own house, unfurnished without rent.
- Rent of primary residence is just what one would expect. It is measured price of rent, unfurnished, without utilities.
Mass Confusion Over OER
Contrary to widespread myth, OER is a measured price with very minor imputations that do not matter. OER is designed to track rent prices and it does. It is a measured price.
Much of the confusion comes from a misquoted BLS statement on OER, emphasis mine.
The expenditure weight in the CPI market basket for OER is based on the following question that the Consumer Expenditure Survey asks of consumers who own their primary residence: “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?”
Note that these responses are not used in estimating price change for the shelter categories, only the weight.
People quote that question as if that is how the BLS measures prices. It doesn’t. Prices, except for minor, irrelevant imputations, are based on actual measured rents.
No One Pays OER
The problem with OER is the weight not the measure. No one actually pays OER. Rather, people pay mortgages.
Yet, OER it is the single largest component of the CPI with a weight of 26.769 percent. Rent has a weight of 7.671 percent.
Many people conclude that the CPI is overstated because no one pays OER. The problem with this idea is home prices are at record highs and home prices are not in the CPI at all.
Homes are not in the CPI because economists consider them a capital expense not a personal expense.
But so what? Inflation matters not just consumer inflation. The Fed has made a big mess of things by ignoring obvious housing bubbles.
30-year mortgage Rates
When the Fed slashed interest rates to zero, mortgage rates fell below 3.0% for an extended period allowing everyone to refinance at 3.0 percent or below. Most did.
OER rose from 332 to 403 between January of 2020 and January of 2024. That’s a gain of 21.4 percent.
Rent rose from 338 to 412. That’s a gain of 21.9 percent.
Whereas the renter is struggling, the homeowner refinanced lower putting extra money in his pocket every month.
Home owners also benefitted from rising wages, rising value of their home and a stable, not rising mortgage payment.
Winners and Losers
- The homeowners are generally doing OK. The home ownership rate is 65.7 percent.
- The 34.3 percent who rent are generally not doing OK.
The study did not break things down by home owners vs renters, but I suspect most of the use is by renters.
According to the latest CPI report, rent was up at least 0.4 percent for the 29th straight month. Shelter, a broader category, rose 0.6 percent. Food rose 0.4 percent.
Whereas home owners have a fixed payment, likely refinanced lower than their initial mortgage, renters faces huge increases, not every month, but once a year, big bang.
For discussion please see Another Hotter Than Expected CPI Led by Shelter, Up Another 0.6 Percent
The stress is easy to spot by demographics.
Credit Card and Auto Delinquencies Soar
Credit card debt surged to a record high in the fourth quarter. Even more troubling is a steep climb in 90 day or longer delinquencies.
Record High Credit Card Debt
Credit card debt rose to a new record high of $1.13 trillion, up $50 billion in the quarter. Even more troubling is the surge in serious delinquencies, defined as 90 days or more past due.
For nearly all age groups, serious delinquencies are the highest since 2011 at best.
Auto Loan Delinquencies
Serious delinquencies on auto loans have jumped from under 3 percent in mid-2021 to to 5 percent at the end of 2023 for age group 18-29.
Age group 30-39 is also troubling. Serious delinquencies for age groups 18-29 and 30-39 are at the highest levels since 2010.
For further discussion please see Credit Card and Auto Delinquencies Soar, Especially Age Group 18 to 39
Generational Homeownership Rates
The above chart is from the Apartment List’s 2023 Millennial Homeownership Report
Those struggling with rent are more likely to Millennials and Zoomers than Generation X, Baby Boomers, or members of the Silent Generation.
The same age groups struggling with credit card and auto delinquencies.
On Average Everything is Great
Average it up as Fed and all the clueless economic and political writers do, and things look great.
This is why we have seen countless stories attempting to explain why people should be happy.
Krugman Blames Partisanship
OK, there is a fair amount of partisanship in the polls.
However, Biden isn’t struggling from partisanship alone. If that was the reason, Biden would not be polling so miserably with Democrats in general, blacks, and younger voters.
In addition to Biden’s Age and Senility, this allegedly booming economy left behind the renters and everyone under the age of 40 struggling to make ends meet.
Powell Pleads Patience
In Jerome Powell’s Interview with 60 Minutes, the Fed Chairman Tells 60 Minutes US Fiscal Path is Unsustainable
Powell: When high inflation really threatens to become persistent, we use our tools to bring down inflation. It’s very important for that young couple — and particularly for younger couples starting out who may not have great financial means, that we succeed in this effort.
60 Minutes: You’re asking the American people for patience?
Powell: Yes. And I think people have been patient and have been through a pretty difficult time. And I think now we’re coming through that time and starting to feel a little bit better about things.
Powell, Krugman, and most of the economic writers, even at the Wall Street Journal have not managed to figure out over a third of the nation is struggling.
Many Are Addicted to “Buy Now, Pay Later” Plans
Buy Now Pay Later, BNPL, plans are increasingly popular. It’s another sign of consumer credit stress.
For discussion, please see Many Are Addicted to “Buy Now, Pay Later” Plans, It’s a Big Trap
The study did not break things down by home owners vs renters, but I strongly suspect most of the BNPL use is by renters.
What About Jobs?
Jobs Soar but Full Time Employment Is Barely Changed Since May 2022
- February 5, 2024: Big Explosion of Government and Social Assistance Jobs in 2023 to Help Migrants
- February 16, 2024: Over 100% of the Increase in Employment Since 2020 is Foreign Born
- February 2, 2024: Jobs Soar but Full Time Employment Is Barely Changed Since May 2022
But hey, that’s OK because on average, the economy is great. Or do we really mean, on average the stock market is great, and the average homeowner is fine?
Hello Mr. Powell
There are two economies (the homeowners/asset holders and everyone else). However, there is only one interest rate. Patience please says Powell.
Lowering rates risks risks fueling the housing bubble and the most expensive stock market in history.
Hello Mr. Powell, it’s your move.
What is it we need to measure?
I repeat over and over we need to measure “inflation” not just “consumer inflation”
To do that, we need to measure home prices and property taxes.
And we need to look at actual prices of health care, not prices minus Medicare and minus corporate paid health care.
Ignoring those things is why the Fed struggled for years to produce inflation that was obvious to anyone thinking in proper terms.
Consumer inflation is a poor mechanism to use to make decisions.
What needs to be measured is how many incumbent politicians get removed, as it is CONgress that deficit spends, and it will never change as is. You also have mother WEFers like Janet Yellen who are as senile and/or corrupt as Biden, as witnessed in her last interview – link to youtu.be.
You are always dancing around the issue, acting as if these people are just ignorant, when the reality is most know exactly what they are doing. CONgress has been borrowing for decades without ANY intention of paying things back, and of course they manipulate CPI and use use ‘poor mechanisms to make decisions’. The questions are what are they TRULY trying to accomplish and what are the people going to do about it?
I’m reminded of the Democratic, convicted ballot stuffer, who is now soliciting the RNC for work by saying if you want to win you need to cheat better than the Dems. Nothing will change until a massive amount of people shut down DC like the farmers in Europe and/or everyone walks away for the systemic fraud by not paying their taxes. They know people will not do it until they have nothing left to lose, which will happen this decade, so might as well get the party started.
…but before you do that, you need to understand what inflation is… inflation is not price rises, inflation is when money supply expansion increases faster than growth, and that’s the opposite of what is happening; price rises are due to synthetic scarcity.
Not the Fed’s problem, Those looking to buy a home but cannot afford the record high prices have the problem. Nothing is an accident. The Fed does not make mistakes. Intentional, it’s a power thing
If you have low real rates of interest, you get higher asset prices.
you are describing the way the credit market (bond market) works, where treasuries bid down, means yields up, and then the central banks copy the yields with their interest rates, and continue to pretend that they set interest rates, when they don’t.
US econ is shifting from consumption to production. Online co cut many customers privileges. Globalization to the back of the line. Zoomers & Millennials are working days and nights building real stuff. Many are spending less than they earn, staying home, sharing apt, or renting a small place. AAPL might make a new all time high, but the regional banks and small industrial co are bargains. The media is negative enabling wall street to buy at wholesale prices. SPY looks positive, to be confirmed. SPX backbone is Jan 30/31. In the next few months SPX might backup the 4,600/4,800 range, several times, to test investors nerves.
Banks don’t lend deposits. That’s the biggest error in the history of the world. Loans = Deposits. An increase in one deposit classification depletes another classification dollar for dollar. All monetary savings originate within the payment’s system.
The composition of the money stock has changed. That’s a “sea change”. AD will be higher as a result, and so will interest rates.
“Or do we really mean, on average the stock market is great, and the average homeowner is fine?”
There’s nothing “great” about a stock market consisting exclusively of shares of companies which can’t compete anymore. It doesn’t get “greater” just by printing money to pump it up.
While “the average homeowner” is only “fine” in the sense that the average burglar is.
Houses decay. They DO NOT add value. Hence; and this really, really shouldn’t be hard to comprehend as it’s pretty darned elementary as far as logic goes: The only way merely owning a decaying “home” can possibly increase its owner’s purchasing power; is if someone else has to create that added value.Then have it transferred from him, to the idle guy who sits there owning his decaying so called “asset.”
All value created, is created by productive people and enterprise. Having to support these idles; keeping them in the delusion that they are doing “fine” just sitting there producing nothing, adds enormously; and increasingly so as the delusion bubble keeps being inflated ever higher; to the costs productives are facing. Reducing their competitiveness. It’s not some “just 30%” of people who are being killed by the usury rent rackets, as well as having to bid against nothings living high off of Fed wealth transfers for all scarce resources . It’s also near 100% of all potentially productive enterprise.
The real story of “two economies” are much simpler: We live in an “economy” consisting of almost nothing other than theft anymore. The “two economies”, are 1)Those who live off state sanctioned crass theft. And 2)Those who are being stolen from.
Obviously, Group 1) can live under the delusion that they are somehow “fine.” After all, others; people as well as enterprise; are being robbed wholesale, in order to provide them with unearned welfare and loot to live high on. But those guys don’t contribute anything. They’re just state anointed boat anchors around the ankles of productive people and enterprise. Dragging the whole economic edifice down. Serving less useful purpose, than drug addicted burglars breaking into people’s houses and stealing stuff in order to get high and be “fine” for another while.
While those in group 2), who have no choice but to at least attempt to produce something, since they can’t just sit there living off of theft. After all: Not everyone can live off theft. For there to be something to steal for the idles in group 1), someone else have to produce something which can then be stolen. But things aren’t, in any way, fine just because there is still something left for idle chattering class members to steal from someone else. That robbing itself, drives up the cost for those being robbed. Rendering them less competitive. And, since they are the only ones who do produce anything, that means the competitiveness of the whole country is being destroyed. No amount of printing and robbing can ever change that.
Group 1 are fine until they experience the real world impacts of all the downstream policy decisions that are made to maintain their privileged position – such as illegal mass immigration and crime and the inabilty to procure goods and services safely and consistently, excessive risk that threatens to topple banks and vaporise savings, and a global depression that suppresses the value of pension funds they depend on. The system is looking like it’s creaking into a disasterous long-term malaise.
Maybe there should be 2 currencies.
One inflationproof, only obtainable by actual productive work.
Another, floating, for nonproducing investors.
Just a thought…
you mean like economy class and business class plane tickets? sounds like CCP China, where members of the party live a parallel life like drone ants to the proletariat they pretend to represent. How many CCP serfs can access investments? They are just worker ants.
Rising home insurance, health insurance, and energy costs somewhat decrease the difference between age groups.
Renters don’t pay home insurance, they tend to pay much less for home energy because apartments are more efficient. And younger renters have less exposure to rising health insurance costs than older owners.
I’m sure there is also dramatic regional variation. California is one speed. Texas is another.
Older owners get medicare and renters pay home insurance indirectly via their rent.
Owning a home right now obviously feels better than renting. But that doesn’t mean that owning one’s house is usually a good idea, even if house ownership is excessively subsidized in countries like the US. Calculating real rate of returns on owning a house is notoriously difficult, but owning a house has more often than not been found to be a lousy long-term investment. And as long as the Fed doesn’t go back into QE mode, it’s difficult to see how lowering the Fund rate will have much impact on long-term mortgage rates because the 10-year Treasury looks pretty much stuck around 4% whatever happens to short-term rates or inflation.
Hey Joe Biden. Still wondering why Bidenonomics ain’t working? Read this article. If you are still wondering just ask anyone under 40. It’s almost impossible for them to buy a decent car or to save up for a down payment on a house.
President GW Bush liked Bernanke. His Financial Services Regulatory Relief Act of 2006 was hurried by congress in Oct 2008. The Fed raided banks accounts to save
the large banks. The Fed became powerful. It allowed them to control the front
and the long duration. No printing. No QE1,2,3..It was your money. Between Oct 2008 and Sept 2011 gold popped up from $650 to $1,925. It popped up again between Mar 2020 low to $2,089 in Aug 2020, under JP.
The Fed hiked to lure investors to the gov roach motel. Gravity between the US and Germany dragged the long duration down. From hyperinflation to disinflation. SPX casino is up. It attracts investors from all over the world. Foreigners who want to buy .
AAPL need US dollars. Foreigners who want 3M to get 5.4% need dollars. The size of
US stock markets and the bond markets are the highest by far.
The weight of the silent Gen home ownership is the smallest by far, perhaps even smaller than the Zoomers.
Mike is absolutely correct. unfortunately, the Democrat politicians will squeeze Powell to do the wrong thing.
Rates are going back to zero and housing is going to double.
Interest is the price of credit. The price of money is the reciprocal of the price level. Bernanke conducted the most contractionary monetary policy since the GD.
Waller, Williams, and Logan agree. They “believe the Fed can keep unloading bonds (continue with QT), even when officials cut interest rates at some future date.”
The 1966 Interest rate adjustment act is the paradigm.
“People quote that question as if that is how the BLS measures prices. It doesn’t. Prices, except for minor, irrelevant imputations, are based on actual measured rents.”
But how are they measured? Much of rent has moved from rental properties to individuals renting out their spare rooms to pay for inflated mortgages. Have the BLS moved with the trend or still living in the stone ages? Since they are a government agency, I would guess the latter.
The number of mom and pop rentals is not that big of a percentage. Large buildings rents are now set by an algorithm. This is a relatively new thing. Price is actual measured price and that is why OER correlated to rent. The Cleveland Fed has an updates measure that is more timely (but still lags by a few months). It too tracks OER and rent.
There are few centenarians in the US. The silent gen home ownership is 76.8%, but their number is dwindling fast. There are few of them left. If they sold a house and bought a cheaper house they are still home owners. The boomers might have sold an empty nest and moved south or to a flyover area to retire. Their home ownership is the highest at 77.8%. It has been constant for twenty years, since 2005. What has changed : their front end approaches eighty.
“Homes are not in the CPI because economists consider them a capital expense not a personal expense.”
That statement sums up the all you need to know about the “economist” profession.
But we already knew that.
Yeah, but many people live in multiple houses during their lifetime.
It’s not the capex that is the personal expense, but the mortgage payments, and obviously they vary each time a new house is bought with a different level of capex and i na different rate environment. All relative to income variations.
“That statement sums up the all you need to know about the “economist” profession.”
To say that they are an insult to academia, would be unwarranted flattery.
Hard to imagine a more insufferable human being than Krugman
I just tweeted this post to him directly. I doubt he responds.
Krugman is a superb economist; I am not a fan of his politics, but as a technical economist, he has few peers.
He’s a political hack.
he’s a joke, as is his subject.
All of this is why we need the 50% discount at retail sale and also at point of loan signing as well as utilizing the accounting operation of equal debits and credits that sum to zero throughout the entire economic process. That way people can buy a $400k house for $100k, cut the price of monthly rent by 50%, greatly increase demand for every good and service and transform inevitably painful systemic debt deflation into happy beneficial individual price and asset deflation. Systems were made for Man, not Man for systems C. H. Douglas. C’mon Mish stop being an orthodox grouch and embrace the new monetary paradigm.
The unhappiness with Biden is more than the economy.. it’s the culture, the endless wars, the open borders, and unsustainable debt. Many may be celebrating their credit card prosperity now, but, I wonder how they’ll feel when debt deflation hits and their life’s savings gets marked to market.
What would that look like? Would that wipe out their savings in equities, and leave their tangibles and cash intact?
Beats me. Depends on how the government responds and what vehicles you’ve invested in. But debt deflation will likely be met with massive helicopter money. Inflation is typically governments response to debt deflation.
…which is an accelerant
Generally all of the policymakers and decision makers are those in the group that own homes and assets. And many of the recipients are homeowners or 401k holders. The entire game is rigged to those already in the pool and they rarely make decisions that would harm their own interests even though it would benefit those trying to own a home, assets or a future. And now that so many own homes and 401ks, they would have to accept a lower value of their own assets to vote for a change–and they don’t. 401k, IRA created a massive vested interest in inequality and lower interest rates and favorable treatment of home ownership, if you were alive when those conditions were skewed in your favor, only made these cohorts MORE interested in their riches/consolidation. With Government spending profligately to “help”, well, this inflation is gonna be damn difficult to tame since I talk to lots of folks who know better and they all want a check-valve on their current net worth number. That is the large population segment that owns homes also owns 401ks/IRAs and Mish has written many times–they see the number on a page of their home value and stock accounts and always want the highest number to remain forever. Without acceptance that that number MUST fall in order to alleviate the economic pain felt by a third of the population, how in Hades do we expect the problem to go away. It will take a determined Fed to do that and I haven’t seen a Chair(wo)man yet that has stayed the course long enough nor do i know any friends that don’t clamor for stimmy the nanosecond that number on a page goes down. Two economies indeed but one intractable problem–humans are fine with change as long as it only impacts others.
Good comments – thanks
“The Fed has made a big mess of things by ignoring obvious housing bubbles.”
Paul Krugman quoted someone who said that Greenspan needed a housing bubble to recover the economy from the .com bubble. Thus the Greenspan FED would have ignored the housing bubble.
My big bet … no matter who wins the election, next year we will be headed back to zero percent rates … and not before. Biden needs the savings account interest to woo the old folks who vote, but after the new/old president is in office in 2025, both of them have everything to gain from zero percent rates … and nothing to lose.
Don’t be so sure. Walmart had a good quarter but warned that deflation slowed. If the fed cuts, inflation will spike again and we’ll be in a repeat of the 1970s Volcker era. Great for TIPS bonds though.
link to seekingalpha.com
Two candidates, neither of which in a legal world can run a third time, wouldnt give a darn about inflation. They just want their second term for the history books.
There is no legal impediment for Trump, and sure he cares about a legacy for the history books; but Biden doesn’t even know where he is and has no medical fitness or competence for the job, never mind allegations of corruption and paedophilia.
Add to that the inability of the Government to pay interest on the debt
Never going to happen… unless the 10-year treasury yields crashes to zero.
Very glad to see the OER methodology finally explained properly by BLS. That has troubled me for almost 20 years. Seeing the new explanation here was really helpful.
One bonus: I took a look at the BLS page linked by Mish and noted that for all rents, individual units are only sampled every 6 months. And of course rental contracts tend to be fairly long-term. So updates to the rent components of CPI are inherently very laggy.
Given the high weight of rent and OER in COI, the lag in measuring rent inflation appears to be a large part of why the Fed has had so much trouble spotting and responding in timely fashion to inflationary pressures.
(Ignoring asset price inflation and obvious valuation bubbles is another major flaw, but that’s a separate topic.)
The Cleveland Fed has a more timely measure.
Discussed here:
What’s Really Going on With Rent? Five Measures to Compare.
.
link to mishtalk.com
Well worth a read.
Thanks for the reminder. The NTR looks promising as a more timely indicator and I hope the Fed will (eventually…) take note of NTR’s implications for incoming inflation.
But as you reported, big differences exist between month-to-month NTR changes vs. individual lease renewal pricing. Renewals after 6, 12, 24 months or whatever will still be higher rents… the impact of rising rents on consumers is also laggy.
Two economies and only one way inflation will go.
“It’s turtles all the way down and inflation all the way up!”™
Don’t forget this Thursday (Feb 22) is the 30 Year TIPS bond auction deadline.
Choo! Choo! I’m getting on board the TIPS train… CUSIP 912810TY4
Married couples need a house. Spinsters can live with dad and mum. New generations are lonely, or married, but without kids. Why buy a house?
It’s not lack of money, is lack of purpose.
It’s both… plus the digital distractions/analgesics that foment isolation and singledom.
Mish,
I’m still curious why everyone continues to try and compare rent to a magical OER.
Rent is one encompassing payment that includes mortgage (if the landlord has one), taxes, insurance + profit for landlord. The taxes and insurance are paid by the landlord but in reality by the renter so that’s why it’s really one encompassing payment.
Meanwhile, for home owners, mortgage is just one component. Homeowners also pay taxes and insurance. So rather than trying to guess a magical number like OER, why don’t they use mortgage+taxes+insurance so it’s as close as possible to rent?
Taxes can easily be looked up (public record). Insurance is a little more tricky but they should still be able to get some average values from insurance companies of rates in various states/cities based on home price.
Homeowners may be benefiting from 3% mortgages but they are also being hammered by rising taxes and insurance. I bet those are the same primary contributors to rising rents because most landlords also have those same 3% mortgages but they have to pass on those tax and insurance rises in the form of rent increase. So I am not sure that the 65% homeowners are that much better off than renters other than the rising value of their home.
The sentiment I’ve been encountering in forums is home owners (with no mortgage) don’t understand what it’s like out there.
Homeowners however are dealing with other things these people by and large also don’t understand.
One, homes that are paid off are usually older and require lots of maintenance; new roof, windows, HVAC’s, and many many more random bs bullcrap that needs maintenance annually. Repair costs have skyrocketed. I see many older home owners starting to skimp out on these repairs. Mainly due to rising insurance costs, taxes and medical costs.
Yes, they do own their homes but they didn’t really win any prizes for it. Maybe slightly better off but not by much big picture.
TT, what is it we need to measure?
I repeat over and over we need to measure “inflation” not just “consumer inflation”
To do that, we need to measure home prices and property taxes.
And we need to look at actual prices of medicine, not prices minus Medicare and minus corporate paid health care.
Ignoring those things is why the Fed struggled for years to produce inflation that was obvious to anyone thinking in proper terms.
So yeah, what you say makes sense, except for what I just said. Consumer inflation is a poor mechanism to use to make decisions.
yeah but inflation is not price rises, prices rise due to scarcity as well, and artificial scarcity created by government policies. you can’t have inflation whilst credit issuance is in contraction, it doesn’t work like that, it’s deflation.
What will the fed do with the lack of discretionary spending when everyone’s spending all they have on food, shelter and energy? Lower interest rates? That would just fuel real world inflation even more and would lower discretionary spending more as well. Seems like their model for controlling inflation will not work.
Housing unaffordability is in part due to Fed policies. Low interest rates encouraged investors and speculators in the housing markets and made prices rise faster than inflation. Renters and other lower income households including younger people coming into their homeowning years could not save enough money to buy a home because interest rates were low and housing prices increased faster than savings. A proper interest rate would help keep housing prices rising no faster than inflation and allow consumers to increase savings faster than inflation. The Fed then added fuel to the fire by buying MBS and taking interest rates down to 30 year lows resulting in an increase in housing prices of about 20% in a year. For a young person to get into a house they almost have to assume that the Fed will continue their reckless policies.
Exactly… the price rises of houses are not “inflation”, they are synthetically created scarcity in the form of reduced access, both to actual buildings, and credit, which is contracting. Interest rates are set by credit markets evaluating risk, and when they are high, it means that the debt is too high for the level of growth (or lack of growth), and the credit market sees increased risk of default on debt, and banks reduce the amount of loans they make. None of this is actual inflation. It’s debt-addicted politics.
When I looked at the equivalent age of Gen-X and Millennials, it appears that in 2000 Gen X was around 41-43% homeownership, and in 2018 Millennials were within a point or two of Gen-X (at that equivalent age). I was expecting the rate for the younger generation to lag significantly based on the article’s premise.
Yeah home ownership rises with age. Thats why you see Boomers and GenX constantly rising for a very long time until they reach their peak late in life.
Rather than showing by calendar year, the chart we need to see is average age (ie when the average person in a cohort was 30, what percentage were home owners so we can compare 30 year old Silents, Boomers, GenXers, Millennials).
There’s definitely a difference between the Silents and Boomers and all who came after. If you are Gen X, then you are likely born in the 1960s/70s, and entered the workforce in the 1980s/90s, so your ability to build capital began right after the 70s mess.
Zoomers and millennials communicate via X, or their cell phones. They are playing video games at home, even while their girlfriend is with them. They are lonely with no real friends. They lack social skills that older generations had. They complain, bitch around and protest. They sleep in dad’s beds and eat mum’s food. Mommy doesn’t want to lose her mums power. The man of the house, if he exists, is weaker than the dogs. Many millennials have more money than mums and dads, but their eggs are old.
Does speaking so categorically even constitute an argument?
Sincerely,
Member of middle third of Gen X
Gen X are far from Ex-date. The boomers are not. It doesn’t pay for millennials to buy a house. Dividends are not far ahead.
I know a lot of people between ages 18-40 and not one of them fits your biased blanket description.
Sorry, there are 3 economies – you forgot the Govt, who is the largest borrower and does not adjust their spending, no matter how high the Fed raises rates.
Mish, fix this typo: …”unfurnished without rent.”
Should be: “without utilities…”
Anyone who can’t figure that out deserves to be confused, that’s the conclusion I came to. Would anyone who did not understand that ever visit this site? I sure hope not, for their sake.
As Drake’s song analyzing the persistence of inflationary price increases succinctly summarizes,
‘Cause you know how sticky it get (ayy)
You know how sticky it get (ayy)
You know how sticky it get (ayy)
You know how sticky it get (ayy)
“Homes are not in the CPI because economists consider them a capital expense not a personal expense.”
In other words: the primary purpose of homes are speculative financial vehicles, not shelter for American families.
So of course, home prices are going to increase faster than incomes. Who decided this? When? Have they made laws that advantaged home price appreciation over stability? Who introduced this legislation? When? Who voted in favor?
I’m ready to start pointing fingers at the actual people who made this happen, from either malice, self-interest, and/or ignorance.
The rules/laws favoring real estate have been around a LONG LONG time.
Rules/laws such as:
1) Mortgage interest & local taxes deductions (SALT) on your Federal income taxes
2) Tax free gains of 250K (500K for couples) on your primary residence
Yikes, only 50% of Millennials own a home.
I saw an article a couple weeks ago saying that 60% of adult children are getting financial help from mom and dad. The article also indicated that roughly half of adult children under the age of 30 still live at home. They’ve even coined a new term for parents who help thier adult children with bills….”Snowplow Parents”.
link to usatoday.com
Yes, and it’s odd to see people blaming the government for all our woes, and then turn fire on people younger than them for not owning homes and sheltering with parents… or maybe it’s just that those people are younger (the get off my lawn complex).
I’v never understood the generational finger pointing that so many people get involved with. Boomers point the finger at millennials and Gen Z, while those younger generations point the finger right back. It’s moronic. Both old and young are playing the victim card. Complaining about things that you have zero control over does not make your life better or help you achieve your goals. Observe reality without judgment and adjust accordingly, that’s all one can do.
How many Millenials and Gen Z are FED policy makers or elected Gov’t decision makers?
Boomers/Silent have wrecked younger generations through avarice, greed and self enriching policy and its not even worth arguing at this point.
Well if you are blaming the Fed (which is valid in my view) then you’ll need to go way way back to the Lost Generation (1883-1900) and arguably before. The Fed was created in 1913. So it’s hard to imagine that many of the people involved were from the Lost Generation.
See how far down the rabbit hole this goes? And I’m really skeptical that Millenials and Gen Z would have behaved differently had they been born as Boomers or with the Silent generation. Thinking this way assumes that one generation was born selfish (Boomers) while a subsequent generation (Millennials) was some how spared the selfish gene. It’s certainly true that some individual boomers are selfish, but that’s equally true for Millennials.
What is happening is the natural consequence of development. Technology is lowering wages for an entire generation. It’s not prices going up so much as wages being crushed because so much of modern technology undercuts the costs of labour. In order to be “highly paid” (i.e.: to maintain income levels relative to cost of living), you have to increase your formal technical training and work experience, which takes longer. This is how it goes, earlier generations gradually rise up the education and training pyramid, you can see it in other countries like Korea or China, as the country develops so does educuation, nominal salaries, and expectations; but at the same time, technology pushes costs down and keeps making training take even longer. In Korea now, you have more PhD graduates than they know what to do with. The next phase of this flight from skilled blue collar work to academia, is the return to skilled blue collar work, as costs of investment in tertiary training and education soar, and return on investment plummets; whilst in the skilled blue collar sector, the reverse is true as demand is driven up due to scarcity of people. This also pushes the immigration narrative to try and fill those gaps and keep labour costs low. The overall effect is that incomes fall in real terms, consumption falls, tax revenues fall, and government resorts to increasing debt to pay for society that can no longer afford itself, because it’s growth trajectory has waned to and stalled since the GFC. There is no inflation, there is only deflation, and the mirages of synthetic inflation created by government interventions and policies to create the false impression of growth, but the credit markets are not dumb, and they are pricing the depression, not the delusional highs of the stock market. It is just a matter of time before the maths start hitting the limits where nothing works any more, and the only way is down.
…see China for details.
About thirty years ago, in 1997 the silent generation and the boomers home ownership was above 70%. Millennial home ownership is lagging behind. It’s climbing. It reached
51%. The millennials put their money in creepto and in the stock markets, bc home prices are too high. The risk/reward of homes is too high. SPX reached a new all time high. BTCUSD is above $52K. The millennials and Gen-Z care about trading, making money today, not about home ownership.
As a control system, the FED was a guaranteed failure the moment it was created. At minimum to control a linear system with multiple outputs, the control law is required to exert at least the same number of inputs. The economy is definitely not linear because it is made up by people who have changing buying patterns. Control systems are required to sample the system at least twice as often (preferably 8x) as the highest frequency to be controlled. Control systems also involve lag, which causes corrections to be applied late. Under extreme lag, a controller can destabilize a system.
re: “Control systems also involve lag, which causes corrections to be applied late.”
Economic prognostications within a year are infallible. Lags are constants.